Brazil is upgraded to investment grade

Moody's is now the third major rating agency to upgrade Brazil to investment grade as last year Standard & Poor’s and Fitch Ratings granted Brazil with the investment grade level.

The classification of investment grade is given to countries whose economies are considered safe for investors. A country with investment grade will attract more credit and investment capital, as there is more confidence that the country can pay back its debts. Investors such as pension funds and other professional investors are attracted to invest in countries with investment grade. Countries with good risk ratings will also be able to borrow capital at lower interest rate levels, which usually will spark the economy even further.

Back in time, when Chile, Mexico, Russia and South Africa reached investment grade ratings, inflow of capital from foreign investors increased by 79% to 354% in the following two years of receiving the investment grade rating.

Brazil is the first country that has had it’s rating improve since the global financial crisis began. Brazil’s rating was raised to Ba1 from Baa3 category - considered the initial level for credits with investment grade. Moody has also put Brazil on positive watch, which could mean that Brazil’s credit rating will improve further. In Europe, Moody’s also rates Bulgaria and Croatia with a Baa3 rating.

Some of the reasons Brazil has been upgraded to investment grade are the sound Brazilian banking system, an ability to deal with external shocks, balance of payment and positive return on capital flows. Brazil is one of the few countries that have been able to weather the financial storm and the country’s GDP is growing again at a rate of 2%. For 2010 it is forecasted that Brazil’s GDP will reach growth levels of 4%.

Why is this good news for Brazil property investors?

From a property investor’s point of view it is attractive to find a country where the historical development of the economy has been mediocre but is now showing signs of improvements. This will usually attract the attention of a new group of foreign investors and allow for great capital value appreciation potential.

The changes that have made the economic improvement possible should be healthy in the way that they are aimed at fundamental that will ensure long-term progress rather than short-term boosts. This will enable the economy to improve in a steady and sustainable matter and a stable and strengthening economy will normally equal an increase in property prices, which is ultimately every property investors goal.

Brazil is definitely showing that the country is well on track to grow its economy on the long term. The time to invest in Brazil property has never been better than now while Brazilian real estate prices are still low. View our selection of property for sale in Brazil as well as our resales houses for sale in Brazil. For learning more about the best areas to invest in Brazilian real estate, please see our Northeast Brazil property section.